When President Bingu wa Mutharika came to power in 2004 he defied IMF restrictions on subsiding agriculture, which is still the backbone of the Malawi economy; he went ahead introducing what he called the ‘Farm Input Subsidy programme' and five years down the road, Malawi has become a bread basket.
Now with his fellow economist, former Finance Minister Goodall Gondwe and Reserve Bank Governor Victor Mbewe, President Mutharika has held on to the kwacha and this has not gone down well with other economic experts.
Country representative for the World Bank in Malawi, Timothy Gilbo, is one of those people who oppose Mutharika and his economic team and has since suggested that Malawi should devalue its kwacha for more beneficial reasons.
For example, he said the action will help cushion the country against the effects of the global economic crunch and enable the country to achieve its developmental needs.
“Devaluing the currency would be prudent for the economy,” said Gilbo, who revealed that the World Bank is trying to turn Malawi into a net exporter and in this context its economic gurus have to manage its exchange rate cautiously.
President Mutharika has however says No - as an economist he is not devaluing the kwacha to please a few people.
“Devaluation of the kwacha would only benefit a few people, and most of them are not even Malawians,” argued Mutharika “On the other hand, devaluation would impact badly on poor people as it would increase prices of commodities... the cost of raw material and equipment importation for companies.”
The president said he has resisted a lot of pressure to devalue the kwacha and will continue to do so. “I want to give the business community a stable forex regime so that they are able to plan properly for their production and investments,” argues Mutharika further.
However, the business community Mutharika is trying to protect seems to be toying with a different idea.
“Government has to back up its tight grip on the kwacha with foreign currency injections on the market,” says Malawi Chamber of Commerce and Industry (MCCI) CEO Chancellor Kaferapanjira.
He said as a business community they have a lot of respect for the President and they hope that he knows what he is doing.
“By insisting on holding on to the current value of the kwacha, he must [however] have other alternatives,” he said.
For some months now, Malawi has been suffering from shortage of forex which the Reserve Bank Governor Mbewe dismisses by saying it's just a temporary thing.
“The business community should not panic as things would improve,” said Mbewe who was banking his hopes on tobacco sales which brings a lot of forex but has performed dismally this year in this regard.
According to the Tobacco Control Commission (TCC) 11 weeks of tobacco trading in the country earned the country an accumulative amount of US$102.3m during which a total of 65 million kilograms was sold.
Mbewe said since there was still about 246 million kilograms of tobacco to be sold and once donors start disbursing their financial pledges following successful elections, time was not yet ripe to press a panic button.
Whether this defiance from President Mutharika will reap him success this time round or not remains to be seen, but what is very clear is that there is total disagreement on whether or not to devalue the Malawi kwacha currency or not.
